Distribution of Death Benefit to Minor

[Guest GmcyWT]

A deceased participant's minor child (10) is entitled to an annuity death benefit until age 21. The child lives in Texas. The amount of the benefit is significant, and, in order to commence payout of the benefit, the plan requested documentation of a court-appointed guardian for the property of the child.

The deceased participant was the child's mother, and the child's father does not appear to be in the picture. Instead, an ex-husband of the child's mother (not the father) appears to have been named as executor under her will, which also specifies that the ex-husband/executor is appointed as guardian of the person and estate of the child. However, the death benefit is not being paid/distributed via probate under her will -- it is being paid under the terms of the pension plan (i.e., the will should be irrelevant for these purposes).

The ex-husband/executor does not want to go through the process of setting up guardianship, apparently due to the expense and "best interests of the minor." He wants the benefit to be paid to himself, as trustee of the trust under her will f/b/o the minor child. Alternatively, he proposes the benefit be paid to a custodial account.

Requiring the establishment of a guardianship would appear to be in the best interest of the minor (particularly given that the guardian is not a parent or other relative of the child). Other posts in this forum suggest that requiring payment to a UTMA custodian is an acceptable route, but UTMA accounts do not seem to offer all of the safeguards of guardianship (e.g., no monitoring of how funds are spent -- child or someone else would have to sue the custodian in the event that the funds in the UTMA were spent improperly).

Plan itself is relatively permissive and states as follows: "If the Administrator determines that any person entitled to payments under the Plan is an infant or incompetent by reason of physical or mental disability, it amy cause all payments thereafter becoming due to such person to be made to any other person for his benefit, without responsibility to follow the application of amounts so paid. Payments so made shall completely discharge the Administrator, the Trustee and the Company."

Any thoughts on whether payment of the benefit to the ex-husband/executor (f/b/o the minor child) or to a custodial account would be problematic under the circumstances?

[mbozek]

What does the ct order appointing the ex as the guardian of the child provide regarding what property is to considered to be the estate of the child? Does it state that all property of the child is to be paid to the guardian for the benefit of the child?

As to paying the ex as trustee of a trust established f/b/o of the child you need to consult counsel to determine if this is permitted under TX law.

The Ex has a legitimate concern as trustee to have payments made in the most cost efficient manner to reduce the expenses. The plan admin has the fiduciary duty to determine that the payments due the child are being paid in accordance with the Ct order and the plan. If necessary the plan admin could ask for an opinon of counsel representing the ex in his capacity as trustee that payments to the testamentary trust are permitted under TX law and the court order and get a waiver of liability and hold harmless agreement from the ex.

[Bird]

I find it interesting that it says "...is an infant [not a minor]or incompetent by reason of physical or mental disability..." - as if the plan could/should pay it directly to the minor. (Is being a minor considered a mental disability?)

I'd strongly urge the plan to get legal help. Ultimately I do think a custodial account of some sort is ok.